Sections

ideals
Business Essentials for Professionals

Chinese Ride-hailing Service Didi Chuxing gets $1 billion Investment from Apple


05/13/2016


Chinese Ride-hailing Service Didi Chuxing gets $1 billion Investment from Apple
In a move that Apple Chief Executive Tim Cook said would help the company better understand the critical Chinese market, apple announced that it has invested $1 billion in Chinese ride-hailing service Didi Chuxing.
 
Even as the iPhone business that propelled it to record profitability shows signs of maturing, the US tech giant's rare investment gives it a stake in two burgeoning waves of technology - the sharing economy and car technology.
 
Cook is traveling to China this month in an attempt to reinvigorate sales in the country where it has come under greater pressure from regulators.
 
As automakers and technology companies forge new alliances and make cross investments, the move aligns Apple with Uber Technologies Inc's chief rival in China.
 
General Motors, for example, has also taken a stake in U.S. ride-sharing company Lyft and has recently bought autonomous driving technology company Cruise Automation.
 
He saw opportunities for Apple and Didi Chuxing to collaborate in the future, Cook said in an interview.
 
"We are making the investment for a number of strategic reasons, including a chance to learn more about certain segments of the China market. Of course, we believe it will deliver a strong return for our invested capital over time as well," he said.
 
This was the single largest investment it has ever received, Didi Chuxing, formerly known as Didi Kuaidi, said in a statement. The ride-sharing market in China is dominated by the company which had previously raised several billion dollars. With more than 87 percent of the market for private car-hailing in China, the company said it completes more than 11 million rides a day.
 
The company has been losing billions in a costly battle with Uber for market share in China even though Didi Chuxing is valued at upwards of $20 billion, said surces.
 
As sales of the iPhone level off, the deal offers a glimpse of how Apple may diversify its business, analysts say. Analyst Patrick Moorhead of Moor Insights & Strategy said that a strategy by Apple where services such as Apple Music and mobile payment Apple Pay have been giving the company revenues is reinstated by the ride-sharing investment.
 
"After all the hints about the service business and what they would like to do in the future, it’s all starting to fit together," he said.
 
Whether Apple will enter the automotive business is a billion dollar question that investors are eagerly waiting to get an answer of.
 
Reuters had reported that the company is exploring building a self-driving car and has hired a wide range of automotive experts.
 
With its CarPlay system, which links smartphones to vehicle infotainment systems, Apple remained focused on the in-car experience, Cook said.
 
“That is what we do today in the car business, so we will have to see what the future holds," he said.
 
Cook stressed he remained confident in the market even though Apple's sales in China have slumped amid slowing economic growth there.

"(The deal) reflects our excitement about their growing business ... and also our continued confidence in the long term in China’s economy," Cook said.
 
(Source:www.reuters.com)